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AAE-875. Growth, trade and the environment in developing countries. Anan Wattanakuljarus. Contents. The Overview of Thai Economy Thai Sectors: GDP, Labor, and Wage Thai Core Environment Indicators Thai Tourism Industry The General Equilibrium Model Expenditure and Revenue Function

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slide1

AAE-875

Growth, trade and

the environment

in developing countries

Anan

Wattanakuljarus

contents
Contents
  • The Overview of Thai Economy
    • Thai Sectors: GDP, Labor, and Wage
    • Thai Core Environment Indicators
    • Thai Tourism Industry
  • The General Equilibrium Model
    • Expenditure and Revenue Function
    • Equilibrium Conditions
    • Welfare Analysis
  • The Policy Implications
percentage share of gdp at 1988 prices

Percentage share of GDP at 1988 prices

Source: Office of the National Economic and Social Development Board,

Office of the Prime Minister

tourism revenue share of gdp at current prices

Tourism revenue share of GDP at current prices

Source: Office of the National Economic and Social Development Board,

Office of the Prime Minister

percentage tourism revenue share of gdp at current prices

Percentage tourism revenue share of GDP at current prices

Source: Office of the National Economic and Social Development Board,

Office of the Prime Minister

comparison of revenue from tourism and other major exports millions baht

Comparison of revenue from tourism and other major exports: millions baht

Source: Ministry of Commerce

comparison of revenue from tourism and other major exports millions baht1

Comparison of revenue from tourism and other major exports: millions baht

Source: Ministry of Commerce

percentage of employed persons by industry 1989 2000

Percentage of Employed Persons by Industry: 1989 – 2000

Source : Report of the Labor Force Survey : 1989 - 2000, National Statistical Office

average wages of employed persons by industry for whole kingdom 1989 2000

Average Wages of Employed Persons by Industry for Whole Kingdom: 1989 – 2000 (*)

(*) Relative to the base average wage for the total employed person which is 1

Source : Report of the Labor Force Survey : 1989 - 2000, National Statistical Office

thai core environment indicators1
Thai Core Environment Indicators
  • Climate
  • Natural Disasters
  • Land and Land Use
  • Forest
  • Energy
  • Water
  • Hazardous Waste and Waste
  • Water Pollution
  • Air Pollution
  • Noise Pollution
land land use and forest

Land, Land Use and Forest

Source: National Statistical Office, Office of the Prime Minister

water

Water

Source: National Statistical Office, Office of the Prime Minister

hazardous waste and waste

Hazardous Waste and Waste

Source: National Statistical Office, Office of the Prime Minister

water pollution

Water Pollution

Standard Value

DO = Dissolved Oxygen > 2.0 mg./l.

BOD = Biochemical Oxygen Demand < 4.0 mg./l.

TCB = Total Coliform Bacteria < 20,000 MPN/100 ml.

Source: National Statistical Office, Office of the Prime Minister

air pollution

Air Pollution

Source: National Statistical Office, Office of the Prime Minister

number of tourists 1996 2002

Number of Tourists 1996-2002

Note: Number of tourism excluding overseas Thai.

Source: The Tourism Authority of Thailand

purpose of visit thailand 1996 2002

Purpose of Visit Thailand (%)1996-2002

Note: Number of tourism excluding overseas Thai.

Source: The Tourism Authority of Thailand

reasons of visit thailand in low season 2001

Reasons of Visit Thailand in Low Season 2001 (%)

Note: Tourists answer in order and no more than three reasons

Source: The Tourism Authority of Thailand

occupation of tourists 1996 2002

Occupation of Tourists (%) 1996-2002

Note: Number of tourism excluding overseas Thai.

Source: The Tourism Authority of Thailand

tourist consumption expenditure 1996 2002

Tourist Consumption Expenditure 1996-2002

Note: Number of tourism excluding overseas Thai.

Source: The Tourism Authority of Thailand

percentage share of tourist expenditure 1996 2002

Percentage Share of Tourist Expenditure 1996-2002

Note: Number of tourism excluding overseas Thai.

Source: The Tourism Authority of Thailand

average days of stay in thailand 1996 2002

Average Days of Stay in Thailand 1996-2002

Note: Number of tourism excluding overseas Thai.

Source: The Tourism Authority of Thailand

quantity of accommodations 1997 2001

Quantity of Accommodations 1997-2001

Accommodations: Hotel, Guest House, Bangalore, Resort, Raft, Apartment, Motel

Source: The Tourism Authority of Thailand

the general equilibrium model
The General Equilibrium Model

EXPORT OR IMPORT

RURAL TOURISM

URBAN TOURISM

PARK

NATURE

LABOR

CAPITAL

LAND

POLLUTION

AGRICULTURE

MANUFACTURING

RURAL AREA

URBAN AREA

summary of notation
r Rural tourism

s Urban tourism

a Agriculture

m Manufacture

xi Domestic demand for good i

yi Domestic supply of good i

pi Price of good i

L Labor endowment

K Capital endowment

l Land endowment, l =1

T Land used in agriculture

n Natural Park, (n+T=1)

u Aggregate utility level

z Pollution emitted from manufacturing

t Pollution tax

t Tariff

Mi Net import of tradable good i

Summary of Notation
summary of functions
Summary of Functions
  • Aggregate Expenditure Function
  • Total Revenue Function
aggregate expenditure function 1
Aggregate Expenditure Function (1)
  • Homogenous of degree one in all prices
  • Concave in prices
  • Non-decreasing in prices, utility, pollution emission, and natural park
aggregate expenditure function 2
Aggregate Expenditure Function (2)
  • Shephard’s lemma, the demand for good i
  • Output demand is downward sloping
  • The shadow price of clean environment, or the marginal willingness for consumer to pay to for clean environment
aggregate expenditure function 3
Aggregate Expenditure Function (3)
  • The shadow price of natural park, or the marginal willingness for consumer to pay to preserve natural park:
  • Utility function
total revenue function 1
Total Revenue Function (1)
  • Homogenous of degree one in all prices
  • Homogenous of degree one in all factor endowments
total revenue function 2
Total Revenue Function (2)
  • Convex in prices
  • Concave in factor endowments
  • The supply of good i
total revenue function 3
Total Revenue Function (3)
  • Output supply is upward sloping
  • The quantity of pollution emitted
total revenue function 4
Total Revenue Function (4)
  • The wage of factor
  • Factor demand is downward sloping
equilibrium conditions 1
Equilibrium Conditions (1)
  • The economy’s budget constraint

total expenditure = total revenue

[1]

equilibrium conditions 2
Equilibrium Conditions (2)
  • Net import of tradable goods

[2] to [5]

    • Good is imported if
    • Good is exported if
equilibrium conditions 3
Equilibrium Conditions (3)
  • Pollution

[6]

  • Land market

[7]

  • Inverse world demand for rural tourism

[8]

  • Inverse world demand for urban tourism

[9]

welfare analysis 1
Welfare Analysis (1)
  • Exogenous variables
  • are given at world market prices
  • Endogenous variables
  • are set by world demand for rural and

urban tourism

welfare analysis 2
Welfare Analysis (2)
  • Total differentiate [1], yield
  • Rearrange and using [2] to [6], yield

[10]

welfare analysis 3
Welfare Analysis (3)
  • Total differentiate [8], and rearrange, yield

[11]

[11’]

welfare analysis 4
Welfare Analysis (4)
  • Similarly, total differentiate [9], yield

[12]

[12’]

  • Where, for

Proportional change of tourism prices

Proportional change of tourism import

welfare analysis 5
Welfare Analysis (5)

Own inverse elasticity of world demand for tourism

Cross inverse elasticity of world demand for tourism

Inverse elasticity of Natural Park to tourism prices

Inverse elasticity of pollution to tourism prices

welfare analysis 6
Welfare Analysis (6)
  • Substitute [11] and [12] in [10] and rearrange, yield

[13]

tourism promotion policy 1
Tourism Promotion Policy (1)
  • I would like to analyze the effects of “tourism promotion policy” on the social welfare.
  • The tourism promotion policy indicates the increases in rural tourism export and/or urban tourism export, i.e.
  • For simplicity and isolation of the problem, I assume that there are no tariffs, i.e. free trade policy in all sectors.
  • Therefore, the welfare effects equation is reduced to [13A] below:
the sign 1
The Sign (1)
  • If both rural and urban tourism are normal goods with inelastic demand, then
  • If both rural and urban tourism are normal goods with elastic demand, then
  • If rural and urban tourism are substitutes, then
  • If rural and urban tourism are complements, then
the sign 2
The Sign (2)
  • As mentioned before, this is the shadow price of clean environment (the marginal willingness for consumer to pay for clean environment)
  • As mentioned before, this is the shadow price of natural park (the marginal willingness for consumer to pay to preserve natural park)
the sign 3
The Sign (3)

Natural park has a positive externality on rural tourism. If natural park demand is stronger than natural park supply, then an increase in prices of rural tourism decreases natural park.

In addition, if rural and urban tourism are substitutes, then if rural and urban tourism are complements, then

if rural and urban tourism are complements, then

the sign 4
The Sign (4)

If natural park supply is stronger than natural park demand, then an increase in prices of rural tourism increases natural park

In addition, if rural and urban tourism are substitutes, then if rural and urban tourism are complements, then

if rural and urban tourism are complements, then

the sign 5
The Sign (5)

Pollution has a negative externality on urban tourism. If urban tourism demand is stronger than urban tourism supply, then an increase in pollution decreases urban tourism demand, and so decreases prices of urban tourism.

In addition, if rural and urban tourism are substitutes, then if rural and urban tourism are complements, then

if rural and urban tourism are complements, then

example of policy implication 1
Example of Policy Implication (1)

Example 1:

  • Fixed agricultural land and natural park policy:
  • Fixed pollution emission policy:
  • Rural and urban tourism promotion:

Then:

  • If rural and urban are complements, then there is a welfare improvement.
  • If rural and urban are substitutes, then welfare effects are ambiguous.
example of policy implication 2
Example of Policy Implication (2)

Example 2:

  • Rural and urban tourism promotion:

Then:

  • If rural and urban are complements, and there is a perfect property right or tax system on both natural park and pollution so that:
  • So there is a welfare improvement. And the optimal shadow price of natural park, and the optimal pollution tax are:
example of policy implication 3
Example of Policy Implication (3)

Example 3:

  • Fixed pollution emission policy:
  • Rural and urban tourism promotion:
  • Increase natural park:

Then:

  • If rural and urban are complements, then an increase in natural park ambiguously improve welfare if
  • Note: If people do not care about natural park, , then an increase in natural park ambiguously improve welfare if
example of policy implication 4
Example of Policy Implication (4)

Example 4:

  • Fixed agricultural land and natural park policy:
  • Rural and urban tourism promotion:
  • Decrease pollution:

Then:

  • If rural and urban are complements, then a decrease in pollution ambiguously improve welfare if
other results
Other Results
  • There are many other implication results which could be drawn from the welfare equation [13]. These results are left for further exercises.
  • Further research is also needed in order to determine the own price and cross price elasticities as well as other elasticities for the amenity such as natural park and pollution.